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Determine how cash should be distributed to creditors and partners.

01 / 10 / 2021 Assignment

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Simple liquidation—Schedule of Cash Available

The partnership of Flo and Fay is in the process of liquidation. On January 1, 2011, the ledger shows account balances as follows:

Cash $10,000 Accounts Payable $15,000

Accounts Receivable 25,000 Flo capital $40,000

Lumber inventory 40,000 Flay capital 20,000

On January 10, 2011, the lumber inventory is sold for $25,000, and during January, accounts receivable of $21,000 is collected. No further collections on the receivables are expected. Profits are shared 60 percent to Flo and 40 percent to Fay.

Required: Prepare a schedule showing how the cash available on February 1, 2011,should be distributed.

E 17-2

Liquidation—Journal entries

After closing entries were made on December 31, 2011, the ledger of Mac, Nan, and Obe contained the following balances:

Cash $39,000 Accounts Payable $5,000

Inventory $16,000 Mac capital (40%) $15,000

Nan capital (30%) 8,000

Obe capital (30%) 27,000

Due to unsuccessful operations, the partners decide to liquidate the business. During January some of the inventory is sold at cost for $10,000, and on January 31, 2012, all available cash is distributed. It is not known if the remaining inventory items can be sold.

Required: Prepare all journal entries necessary to account for the transactions of the partnership during January 2012.

E 17-3

Liquidation—Cash distribution computation, safe payments schedule

Fed, Ela, and Luc have decided to liquidate their partnership. Account balances on January 1, 2011, are as follows:

Cash $120,000 Accounts Payable $40,000

Other assets 120,000 Fed capital (30%) 85,000

$240,000 Ela capital (30%) 25,000

Luc capital (40%) 90,000

$240,000

The Partners agree to keep a $10,000 contingency fund and to distribute available cash immediately.

Required: Determine the amount of cash that should be paid to each partner.

E 17-4

Liquidation—Cash distribution computation, safe payments schedule

Jan, Kim, and Lee announce plans to liquidate their partnership immediately. The assets, equities, and profit-and-loss sharing ratios are summarized as follows.

Loan to Kim 20,000 accounts payable 60,000

Other Assets 180,000 Jan Capital (50%) 59,000

200,000 Kim Capital (30%) 29,000

Lee capital(20%) 52,000

200,000

The other assets are sold for $120,000, and an overlooked bill for landscaping services of $5,000 is discovered. Kim cannot pay her partnership debt at the present time, but she expects to have the money in a month or two.

Required: Determine how cash should be distributed to creditors and partners.



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